Funding an R&D project together

If you fund a project of R&D together with other eligible R&D entities as an R&D partnership, there are special rules about who the R&D activities of the partnership are conducted for - see R&D partnerships.

If you are one of a number of entities that funds an R&D project as a group, but not as an R&D partnership, in order to satisfy the effective ownership test it is essential for each contributor to the project to have a proper and effective interest in the R&D results. Examples of situations where a number of entities may fund a R&D project include members of industry associations or members of certain a joint ventures.

Each member of the group eligible to claim the R&D tax incentive must separately register with AusIndustry.

Contributions to R&D activities can take many forms. For example a contribution may be of money, services (provided free or for less than a proper fee), or the use of depreciating assets or premises. A contribution may also take the form of existing research results. The key to comparing contributions in money and in-kind is that contributions in-kind are valued when contributed, not in hindsight after the contributions have been used in R&D activities.


If you and a number of other entities share results of an R&D project or their use, when working out if the effective ownership test is satisfied you must consider whether each party's individual share in those results is commensurate to their contribution made.

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Whether each party's individual share in those results is commensurate to their contribution made is a question of fact which will depend on the individual circumstances of the arrangement.

Example: R&D conducted jointly

Company X and Company Y both operate in the same industry and decide to pool their resources and undertake R&D activities jointly in a field of common interest. They both contribute equally to a pool of funds to fund the R&D activities. They agree that they will both have the same right to use the results of those activities in their respective businesses on completion of the activities.

Despite conducting R&D activities jointly, Company X and Company Y are not partners for income tax purposes. They do not carry on a business in common and are not in receipt of any income jointly.

The interests of Company X and Company Y in the 'know-how' (developed from the expenditure on the R&D activities) are the same and commensurate with their respective expenditures. As a result, both entities have effective ownership of the results arising from their own expenditure.

The expenditure of each company is not a recoupment or reimbursement of the other's expenditure, so Company X and Company Y each bear their share of the financial burden of the R&D activities. While the R&D activities might be said in one sense, to be conducted for them both, their joint input into what activities are carried on, their sharing of the financial burden and the nature of their respective interests in the results, where neither can restrict use by the other, means that their individual contributions are not on R&D activities conducted to a significant extent for the other.

Example: Members of industry associations

Members of industry associations may effectively be co-owners of the R&D results obtained on their behalf. Free individual use of results is practical for them. Co-ownership of this kind is consistent with the R&D having been carried out for the members, with each having a proper and effective separate interest in the results. If each member makes a contribution, even if the contributions vary somewhat, those contributions would not usually be regarded as having been made for the purpose of carrying out R&D activities for another.

Example: Shareholders of a company conducting R&D activities

A number of Australian companies establish and become shareholders of another company (also incorporated in Australia). This jointly owned company conducts R&D activities, or has them carried out. Those activities may be funded by the shareholder companies. The fact that shareholders expect an indirect benefit by way of dividends does not mean that the shareholder companies effectively own the results of the R&D. Further, it does not mean that the company in which they hold shares conducts its R&D activities for them.

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    Last modified: 25 Oct 2016QC 26121